Are the Sanctions Working?

I guess that depends on your operative definition of “working”. Russia has not withdrawn from Ukraine. The Russian economy hasn’t collapsed. The Russian people haven’t risen up and overthrown Vladimir Putin. If this op-ed by Kevin T. Dugan at MSN’s Intelligencer is to be credited, they aren’t accomplishing much at all:

Anecdotally, the pressure seems to be diffuse and hard to pinpoint: A Moscow resident I’ve known since well before the war told me over Telegram that grocery stores were full of food and mostly 5 to 10 percent more expensive; diesel gas prices were 53.59 rubles a liter, or roughly equivalent to $2.70 a gallon — cheaper than just about everywhere in the U.S.; and luxury-goods retailers on Tretyakovsky Proyezd, Moscow’s equivalent to Rodeo Drive, are still apparently selling clothes and handbags on the down low to some of their most prized customers, thanks in part to the government blessing the gray market in upscale goods. Russian President Vladimir Putin has called sanctions a “declaration of war” — and perhaps it is, but it has also been a propaganda boon for the Kremlin as it escalates its war in Ukraine.

Remember, Russia was prepared for this. As one of the world’s largest economies — with a gross domestic product of around $1.8 trillion — Putin has leveraged the country’s most important asset, its oil and natural gas reserves, so that countries like Germany are more reliant on it than ever. But it’s not just that the rest of world was caught flat-footed. According to Columbia University economist Adam Tooze, the Russian budget had been engineered prior to the invasion to balance out if the price of oil fell to $44 a barrel, meaning that it’s been able to sock away a ton of money. Ever since 2014, when Putin faced Western sanctions for the annexation of Crimea, more of Russia’s goods have been produced domestically and debts were restructured to be paid in the local currency. In its run-up to war, Russia effectively removed itself from the global system where it was spending while further entangling its neighbors that were giving it money, and given the country’s size and power, made it difficult for the world to reverse course.

Contrary to the imputed objectives, Russia has not been shut out of the financial system and has not been isolated. And this is a critical point:

If you want to to see how the West is undermining its own sanctions, look no further than Russia’s oil and gas sales. Those deals, negotiated prior to the war, are in dollars and euros. While Putin has previously tried to get “unfriendly” countries to pay for the energy in rubles, that hasn’t really been the case. Ribakova points out that all those unsanctioned banks can still hold foreign currencies — effectively acting as a replacement for some of the dollars and euros that the Central Bank of Russia has been frozen out of. “It was a dramatic blow to the whole sort of principle of fortress Russia, the central bank sanctions,” she says. “For them, it would be important for financial stability purposes to accumulate foreign reserves.”

Maybe further escalations and more time are needed for the sanctions to really bite.